If you own a $1,000 face value bond with one year remaining to maturity and a 3 percent coupon rate and new bonds are paying 14 percent, what is the most you can get for your old bond?
A)$903.51
B)$997.19
C)$1,000
D)$1,140

Question

Quizplus · Accepted Answer

The bond's price is calculated by discounting the future cash flows (coupon payment and face value) at the new market interest rate (14%). The bond will pay $30 in interest and $1,000 at maturity. The present value of these cash flows at 14% is $903.51.

If You Own a $1,000 Face Value Bond with One